Important information - The value of investments can go down as well as up, so you may not get back the amount you originally invest.
Today’s meeting between the world’s major oil producers could be a pivotal moment for the oil industry. Something positive certainly needs to come out of it.
In March, the failure by OPEC, the group of mostly middle eastern oil producers, to agree to cuts in global production, led to a sharp slide in oil prices. Subsequent moves by Saudi Arabia and Russia to boost production and retain their own market shares - at a time when global demand was falling because of the pandemic - created an even bigger glut and we have since seen oil prices slump to an 18-year low.
The hope today is that oil prices will get a boost if Saudi Arabia and Russia are able to make amends after their fallout last month. Hopes seem high for a positive outcome. Already Brent crude has risen 3% to $33.95 a barrel on hopes that today’s meeting, held virtually of course, will end in agreement that up to 15 million barrels a day will be cut from global supply. A cut of 10 million barrels a day would amount to about 10% of global output.
Even that won’t end the problem of over-supply completely, but the hope is that it should stabilise prices. The oil price has slumped to levels not seen since June 2001 as investors have grown increasingly concerned that the global spread of the virus will further hit the global economy and demand for oil.
As Tom Stevenson, Fidelity’s Investment Director, says in his latest Investment Outlook, oil does look oversold on supply fears.
However, as he points out: “The price of industrial commodities and oil are both closely linked to prospects for economic activity. Clearly, the prospect of a painful recession, even a short one, is not good for the asset class as a whole.
“This might make oil an interesting speculation at the current level of around $30 a barrel, but backing a rise in the price ahead of a nasty recession is a brave call.”
You can read Tom’s thinking here in his full Outlook report. In it he analyses global markets and the key asset classes and provides a much-needed outlook for the next 12 months.
As always, Tom took part in a webcast, which we filmed this week, setting out his views and also, as he always does, answering all your questions, on everything from oil to gold, equities, asset classes and investment strategies in the current situation.
As you can imagine, there were plenty of questions to get through and Ed Monk followed up with a special MoneyTalk Radio podcast, where Tom answered even more of your questions. You can listen to that now. You will find the podcast on iTunes, or wherever you usually get your podcasts from.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. This fund invests in overseas markets so the value of investments can be affected by changes in currency exchange rates. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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